A par­ent’s painful dilemma

Sunday Herald Sun - - Finance - SCOTT PAPE If you’ve got a burn­ing money ques­tion, qu or you want to win a fight with your hubby, shoot over to Bare­foot­in­vestor.com Baref and ask a ques­tion

BEVERLEY WRITES: I have worked as a nurse urse my whole life, sup­port­ingg two daugh­ters and a men­tal­lyy un­well hus­band who has since died.

I am 64 and d re­tired, and com­pletely over­whelmed. ver­whelmed. My 31-year-old is in LA; I pretty much sup­portt her, though I do not mind help­ing her out.

My 27-year-old r-old be­came a miss­ing per­son n back in 2015 and I have spen­tent a lot of money look­ing ng for her on the US west coast. oast. I in­tend to find her, and nd to do this I want to sell my y fully paid­off home (in Mul­lumbimby,y, NSW), for which I woul­dould prob­a­bly clear r $480,000. But t what then? BARE­FOOT REPLIES: As a par­ent my heart breaks foror you. But you’ve asked me for fi­nan­cial ad­vice, so here e goes.

You know when you’re on a plane and the he flight at­ten­dant does the safety de­mon­stra­tion.

Have you no­ticed they al­ways say, “put on your own oxy­gen mask be­fore you help oth­ers”. There’s a rea­son for this — you’re no good to any­one else if you can’t breathe your­self.

The same goes for your fi­nan­cial sit­u­a­tion.

You’re re­tired now, so you’re not earn­ing an in­come.

There’s safety and security in own­ing your own home, so please don’t sell it. Rent it out, and head over to Amer­ica by all means, but don’t sell it.

NO, I’M RIGHT

DOUG WRITES: I’m sorry to say this but your book is WRONG.

In the chap­ter on re­tire­ment — “The Don­ald Brad­man Re­tire­ment Strat­egy: Why You Don’t Need $1 Mil­lion to Re­tire” — you state:

“You can’t re­tire un­til you have $250,000 in su­per for cou­ples or $170,000 for sin­gles. What’s so spe­cial about these num­bers? This is the max­i­mum dol­lar amount of as­sets (ex­clud­ing your fam­ily home) that you can have and still get close to the max­i­mum age pen­sion.” WRONG! Ac­cord­ing to the Cen­tre­link web­site, you can have $375,000 for a home­owner cou­ple and $250,000 for a sin­gle home­owner, and still qual­ify for the FULL age pen­sion.

You will need to PULP your best-sell­ing book! BARE­FOOT REPLIES: Thanks for the all-caps SHOUTY SHOUTY. Nice touch. I’m not wrong. Cen­tre­link ap­plies two tests for the age pen­sion: an as­set test and an in­come test. Then they base your pen­sion payme pay­ment on which which­ever test gives the lo lower fig­ure.

If you were a coup cou­ple and had $37 $375,000 in as­sets, you wouldn’t ac­tu­ally get the full age pe pen­sion — bec be­cause you’d fail the in­come test.

S Stay with me here here, sho shouty, and I’ll ex­plain why.

Cen­tre­link “deems” a rate of re­turn that re­tirees get from their as­sets. If you’re a cou­ple, the first $81,600 of your com­bined as­sets (other than the fam­ily home) are deemed to earn an in­come of 1.75 per cent per an­num, and any amount over that is deemed to earn an in­come of 3.25 per cent per an­num.

If you do the sums you’ll find that a cou­ple with $375,000 worth of as­sets would be deemed to have earned an in­come of $10,963.50 per year from their as­sets. Now let’s look at the in­come test.

Re­tired cou­ples can earn a max­i­mum of $292 a fort­night ($7592 per an­num) in in­come be­fore their age pen­sion is af­fected. For every dol­lar they earn over that, their age pen­sion is re­duced by 50 cents in the dol­lar.

Do the sums again and you’ll see that if a cou­ple have $375,000 in as­sets, then their age pen­sion will be re­duced by $1685.75. Only on (roughly) $250,000 would the pen­sion not be af­fected, like I say in my book.

To be clear, the fig­ures in my book take into ac­count both the as­set and the in­come test — but I didn’t want to bore any­one to death (though for you I’ve made an ex­cep­tion).

The truth is that fi­nan­cial plan­ners, banks and other fi­nan­cial flog­gers scare the hell out of peo­ple when they say you need $1 mil­lion to re­tire com­fort­ably. It’s com­plete self-serv­ing rub­bish (the more as­sets you have, the more fees they can grab).

Only about 1 per cent of peo­ple have su­per bal­ances over $1 mil­lion. I’m writ­ing for the 99 per cent, show­ing them that they can re­tire with dig­nity if they have a paid-off home, have $250,000 in com­bined su­per, and work a day or so a week.

THANK YOU, DOUG!

SHIP OF FOOLS

MARTIN WRITES: I am look­ing at mak­ing some in­vest­ment de­ci­sions for the next 3-5 years to save a de­posit for a first home.

An op­tion I am look­ing at is to buy ship­ping con­tain­ers. Of the com­pa­nies I have re­searched, the terms are: $5000 per con­tainer, 5-year min­i­mum hold, sell-back at full pur­chase price (cap­i­tal pre­served), 9.75-12 per cent fixed lease op­tions, paid monthly if four or more owned. You al­ways say “when some­thing sounds too good to be true, it is”. Thoughts? BARE­FOOT REPLIES: You’re talk­ing about an un­reg­u­lated in­vest­ment — mean­ing you have no pro­tec­tion if it all goes pear­shaped. I’d be as tempted to in­vest in this as I would to live in a ship­ping con­tainer.

Yes, it’s too good to be true.

A BAD CASE OF STD

MELINDA WRITES: I am 38 and I earn $90,000, and I have a money prob­lem I need your help with.

I was stupid to co-sign a ve­hi­cle loan with my exboyfriend. The ve­hi­cle was never in my pos­ses­sion and then (in 2010) it was re­pos­sessed. A credit

com­pany is now chas­ing me for 100 per cent of the amount ow­ing, which is $11,000. I tried to ne­go­ti­ate it down to 50 per cent, but no joy. BARE­FOOT REPLIES: Well that sucks. The jerk gave you a nasty case of Sex­u­ally Trans­mit­ted Debt (STD). But I have good news.

It sounds like this debt could be “statute barred”. Ba­si­cally, if the debt is older than six years, un­der most cir­cum­stances the debt col­lec­tors can’t chase you for it. Even bet­ter, the de­fault should have fallen off your credit card file as well.

The most im­por­tant thing is not to make any pay­ment or ad­mis­sion of ow­ing the debt. The other thing is to sit down with a com­mu­ni­ty­based fi­nan­cial coun­sel­lor and check whether the debt has in fact lapsed. Call them on 1800 007 007 and book an ap­point­ment.

Fi­nally, think of it this way: imag­ine what it would have cost if you’d mar­ried this loser!

The Bare­foot In­vestor holds an Aus­tralian Fi­nan­cial Ser­vices Li­cence (302081). This is gen­eral ad­vice only. It should not re­place individual, in­de­pen­dent, per­sonal fi­nan­cial ad­vice.

The Bare­foot In­vestor: the only money guide you’ll ever need (Wi­ley $29.95). her­ald­sun.com.au/shop

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